EURJPY Pattern Play

EURJPY price action is looking very interesting here ahead of the ECB meeting this week. The pair has been trading higher this year, underpinned by the rising trend line from the March lows. Similarly to what we saw over June – September, price has recently been correcting lower within a bear channel. Given the broader uptrend, the current move can be viewed as a bull flag, highlighting risks of an eventual break higher as we saw from the last formation.

Two-Way Risk into ECB

Given the event risk on deck with the ECB this week, the pattern looks even more interesting. The ECB is tipped to hike rates by a further .5%. However, on the back of recent eurozone data and hawkish commentary from several ECB members, there are clear hawkish risks going into the meeting. Should the ECB press ahead with a larger hike or signal more aggressive action to come, EUR looks likely to make fresh gains against JPY given the BOJ’s continued commitment to maintaining an easing presence in the market. However, should there be any dovish surprise at the meeting, EURJPY runs the risk of breaking below the rising trend line and correcting deeper still.

Technical Views

EURJPY

Following the bounce off the rising trend line and the 140.82 level, price is now testing the 144 level and corrective bear channel top. If we see a break higher here focus will turn back to the 147.75 level next and a potential break to new highs. To the downside, any move below the 140.82 level will open the way for a test of the 137.74 level next.